1.(S) In a June 4 working lunch with Assistant Foreign Minister He Yafei, Acting Under Secretary for Arms Control and International Security John Rood pressed for more information on China's January 2007 anti-satellite (ASAT) test and future intentions, greater detail on China's nuclear weapons doctrine and future nuclear posture and improved cooperation in preventing a nuclear-armed Iran. Acting U/S Rood stressed U.S. concern regarding Iranian transfers of Chinese conventional weapons to militants in Iraq, Lebanon and Afghanistan and urged China to cease arms sales to Iran. Rood informed AFM He that two Chinese companies could face U.S. sanctions as a result of missile proliferation activities and sought cooperation from Beijing to address their activities. AFM He repeated assurances that China has no intention to conduct further ASAT tests, but shed little light on the current status of the program. Similarly, Chinese officials provided no new information on China's current nuclear force posture or its future plans for its nuclear arsenal, though they expressed enthusiasm for conducting a second round of the recently initiated Nuclear Dialogue in Beijing later this year. AFM He said China understands U.S. concerns regarding Iranian nuclear ambitions, but believes the issue should be addressed directly with Tehran rather than in the UN Security Council. He expressed a desire to hold discussions on the companies facing proliferation sanctions. AFM He said that China understands the U.S. motivation for developing missile defense but stated that placing missile defense radars in Japan is threatening to China. End Summary.

Strategic Security ------------------

2.(S) OSD Principal Director for Strategic Capabilities Rich Davison outlined positive steps the United States and China have taken to increase mutual understanding on the role of nuclear weapons in each country's national security. Davison noted that the April 2008 U.S.-China Nuclear Dialogue is the latest in a series of steps that include then-Secretary of Defense Rumsfeld's visit to the PLA Second Artillery headquarters in 2005, Presidents Bush and Hu's 2006 agreement on the importance of a nuclear dialogue, House Armed Services Committee Chairman Ike Skelton's August 2007 visit to the Academy of Military Sciences and discussion of nuclear policy at the December 2007 Defense Consultative Talks (DCTs) between General Ma Xiaotian and Under Secretary of Defense for Policy Eric Edelman.

3.(S) Davison outlined the detailed briefing the U.S. side gave to Major General Huang on the U.S. Nuclear Posture Review at the April talks and the Chinese side's explanation of its "no first use" policy and offer to host a second round in Beijing later this year. Davison summarized the new U.S. posture's focus on a limited number of bombers, land-based missiles and nuclear-armed submarines. He noted that the United States will reach its Moscow Treaty target ahead of schedule and that the planned force represents a 50-percent cut in the U.S. nuclear arsenal over the past 15 years and an 80-percent cut from the height of the Cold War. Davison said the United States seeks a comparable level of detail from the PRC on its nuclear modernization plans either during this round of the Security Dialogue or at the Beijing round of the Nuclear Dialogue, which would include a discussion of Beijing's threat perception, China's criteria for determining the size of its force and the desired end state of China's nuclear force modernization. He added that China is actually increasing the size of its nuclear force, even as the other four permanent members of the UN Security Council are cutting theirs.

4.(S) Senior PLA Navy Captain Guan Youfei, Deputy Chief of the Ministry of National Defense Foreign Affairs Office, replied that China sees great value in the Nuclear Dialogue and believes it should continue once the Olympics are over. He explained that the PRC's longstanding "no first use" policy, put forward in 1964 at the time of China's first BEIJING 00002322 002 OF 007 nuclear test, is still in effect for the purpose of self-defense and deterrence of a nuclear attack on China. The PLA has exercised restraint in increasing both the quantity and quality of its arsenal and for this reason is confronting internal questions of security and reliability. He hoped the U.S. side would be prepared to discuss what China believes is U.S. nuclear targeting of China. Guan said in order to prepare for the next round of the Nuclear Dialogue, the United States and China should compare notes on the top issues of concern to both sides. Guan expressed interest in nuclear disarmament and arms control as possible topics.

5.(S) In response to Acting U/S Rood's calls for greater Chinese transparency, AFM He said this is a sensitive issue and that he and the other members of his delegation do not know the size of China's nuclear arsenal, though it is the smallest arsenal of the P5 countries. He added that Chinese nuclear doctrine has deterrence as its cornerstone and that every member of the P5 modernizes its nuclear force. He said China appreciated President Clinton's June 1998 assurance that the United States did not target China with its nuclear force but noted that "now is not the time for China to tell others what we have." He said that if China reveals the size of its nuclear arsenal, this would eliminate its deterrent value.

6.(S) When asked by Acting U/S Rood if the size of the U.S. military is a factor in China's nuclear doctrine, Senior Captain Guan replied that China as not designated any one country as an enemyand that the Chinese nuclear force is not lined to the size of other countries' militaries, though he added that China does need to ensure that ts nuclear weapons are effective for defensive purposes. (Note: U.S.-Japan missile defense cooperation is the only factor that the Chinese are willing to acknowledge plays a role in determining the size and characteristics of their nuclear force. Otherwise, Chinese officials maintain that China's nuclear force expansion and modernization is unrelated to the size and characteristics of other nuclear forces.) In a moment of candor that harkened back to Sun Tzu's admonition to conceal your strengths and weaknesses from an adversary, AFM He flatly stated that China does not favor displaying the same transparency regarding nuclear weapons holdings or delivery platforms that the United States, UK, and France have shown, since doing so would eliminate the value of China's strategic deterrent.

7.(S) Reiterating remarks made by OSD Strategic Capabilities Deputy Assistant Secretary Brian Green at the April Nuclear Dialogue, Director Davison stressed that the United States does not view China as an enemy and has not targeted other countries since 1994. The United States understands that the PRC needs a safe and secure nuclear arsenal. Davison emphasized that the United States has not built any nuclear weapons since the early 1990s and therefore has the oldest arsenal in the world. Davison underscored that the United States is the only P5 country without the capability to produce a nuclear weapon.

8.(S) AFM He concluded the session by underlining China's desire to ensure it is never the victim of a nuclear attack and asserting that China will never seek nuclear superiority by "following the footsteps of the Soviet Union." He added that China and the United States "have much to discuss" on the nuclear issue and said that China should find a date this year for another round of nuclear talks sometime after the Olympics.

Outer Space Security Issues ---------------------------

9.(S) MFA Arms Control Department Deputy Director General Li Song began the discussion on outer space by citing China's support for the peaceful use of outer space and opposition to the weaponization of space. He expressed hope the United States will join other countries in supporting China and Russia's jointly sponsored treaty on the Prevention of an Arms Race in Outer Space (PAROS) at the Conference on Disarmament in Geneva. Responding to Acting U/S Rood's question on the nature of China's January 2007 anti-satellite (ASAT) test, Li said that the test was not targeted at any BEIJING 00002322 003 OF 007 one country. AFM He also said China did not believe the test would constitute a threat to any country. In response to Acting U/S Rood's questions about whether China is continuing work on its anti-satellite program, AFM He repeatedly assured Acting U/S Rood that China has no plans to repeat such tests, that he has given his personal assurances to Ambassador Randt on this issue and that he hopes an international instrument banning the weaponization of outer space can be concluded. Acting U/S Rood responded that he does not understand China's need to conduct an ASAT test unless China sees some practical use for such technology, which could only be considered a space weapon. The United States still does not have a complete understanding of China's ASAT program and seeks clarity on what remains a topic of concern in Washington, he said. AFM He noted that China acknowledges U.S. concerns about the ASAT test and said China has provided ample reassurances it will not conduct such tests in the future.

10.(S) AFM He assured Acting U/S Rood that the United States does not have to worry about China's program for three reasons. First, the United States is "number one" in space technology, with Russia being "number two;" China has not "crossed any thresholds" in space technology. China is not developing original capabilities but rather "only getting what others have already." Second, China's careful monitoring of the ASAT test revealed that it created only a tiny proportion of current space debris. Third, China will not be conducting any follow-up ASAT tests. AFM He asserted that as Chinese science and technology improve, China will continue developing new space and marine capabilities. This is an "inevitable and natural extension" of Chinese modernization. China "cannot accept others setting limits on our capabilities." AFM He continued on what he referred to as a "philosophical" issue, asserting that in modern, contemporary history, there has never been a time when China and Japan were strong at the same time. It is "psychologically difficult" for Japan to accept that China might now be stronger. China's ASAT test presents a similar "psychological" question, AFM He claimed. He concluded his remarks with a personal reassurance to Acting U/S Rood that China will not conduct further tests, saying that his assurance is "not in my talking points." (Note: AFM He consistently referred to the ASAT test as a "test" vice earlier Chinese references to the test as a "scientific experiment.")

11.(S) Acting U/S Rood continued to press AFM He by contending that the issue is not the development of space technology by China per se, but rather how China applies such technology, and that it is important that China understand the depth of U.S. concern on this particular issue. AFM He responded that "this message is not lost." Director Davison refuted AFM He's claim on the space debris issue, noting that the debris from China's ASAT test constitutes as much as 30 to 40 percent of current low-earth orbit space debris. The ASAT test violated China's signature of the protocol on debris prevention and calls into question China's position as co-sponsor of a treaty on space weapons. Acting U/S Rood highlighted the fact that the draft treaty proposed by China and Russia would not capture China's SC-19 direct ascent interceptor. Department of Defense Principal Director for East Asian Security Affairs John Hill pointed out that the United States is not the only country seeking Chinese transparency on these and other issues; China's neighbors seek this as well.

Missile Defense ---------------

12.(S) Turning to ballistic missile defense, Acting U/S Rood said U.S. policy has evolved substantially under President Bush's leadership and is now part of our contemporary deterrence policy. Noting that over two dozen countries now have or seek to develop ballistic missile capabilities, he explained how missile defense contributes to U.S. deterrence by providing an added layer of defense. While the United States continues to use approaches like the Missile Technology Control Regime to stem proliferation, missile defense has become part of our nonproliferation approach as well. The United States is pursuing missile defense cooperation with some of its allies, although other countries, such as France and India, are pursuing missile BEIJING 00002322 004 OF 007 defense without U.S. assistance. Acting U/S Rood stressed that the United States views missile defense as non-threatening, because it cannot be used unless another nation fires a missile.

13.(S) Principal Director for Strategic Capabilities Rich Davison provided an overview of U.S. missile defense policy. He noted that despite global nonproliferation efforts, missile proliferation has greatly expanded, with over 25 countries currently possessing ballistic missile capabilities. Countries that once imported missile technology, like North Korea, have become exporters. Iran is trying to extend the range of its ballistic missiles and has reportedly purchased intermediate-range missiles from North Korea. It is not prudent to rely solely on diplomacy to deal with this threat, he stressed. For this reason, the United States plans to develop and deploy 54 interceptors (44 based in the United States and 10 in Poland) over the next few years. This system will serve four purposes: 1) reassure allies; 2) dissuade countries from acquiring missiles; 3) deter adversaries from proceeding with a missile attack; and 4) defeat an attack should one be launched. Missile defense also provides stability during a crisis. For example, he explained, missile defense afforded the United States flexibility in considering how best to respond to North Korea's provocative missile tests in July 2006. He pointed out that the United States cannot wait until a country successfully tests its long-range missiles before deploying missile defenses, because the system requires significant time to develop and test.

14.(S) Davison said the ten interceptors to be based in Poland pose no threat to Russia's strategic forces. The United States has gone to great lengths to reassure Russia and has proceeded in a transparent manner. Recalling the numerous meetings between Russian and U.S. officials at various levels over the last several months, Davison pointed out that the United States has offered to cooperate with Russia to develop a joint missile defense system. Although Moscow agreed to this proposal, Russia insisted the United States cease its cooperation with Poland. This precondition is unacceptable to the United States. The United States continues to believe that cooperation and transparency will reassure Russia, Davison said, noting that in March, the United States proposed a U.S.-Russia-Europe missile defense plan, about which discussions with Russia continue. Davison noted that Russian objections to U.S. missile defense are not based on strategic considerations, but instead stem from the fact that the system will be deployed in a former Warsaw Pact country.

15.(S) Saying he appreciated the detailed U.S. presentation, AFM He said he understands why the United States decided to develop and deploy a missile defense system. Although China is "not opposed to missile defense per se," Beijing believes it could have a significant impact on "global strategic stability" and "break the global balance." AFM He outlined three reasons why China is concerned. First, if U.S. offensive military capabilities, which are already the greatest in the world, are coupled with "the most advanced defensive system," the United States will have a "great advantage." The deterrence abilities of other states will be undercut. AFM He remarked "DFM Kislyak must have also told you how these developments will provide the United States with a unique supremacy of strategic safety." China is not saying missile defense is "good or bad," he asserted, only that it will affect the strategic balance. Second, U.S. missile defense cooperation with Japan has the "greatest relevance to China," because a missile defense radar in Japan would cover all of China.

The PRC's "limited nuclear capabilities" would thus be affected, he said, particularly since missiles are vulnerable in the boost stage. Because missile defense undercuts China's limited deterrence capabilities, this, rather than the size of the U.S. nuclear arsenal, would "force China to rethink its nuclear strategy," he stated. Third, any "proliferation" of missile defense technology to Taiwan would affect China's national security, "since there is no clear line between defensive and offensive missile technology" and would be an issue Beijing "would have to confront." AFM He proposed the United States and China continue discussing this topic. BEIJING 00002322 005 OF 007

16.(S) Acting U/S Rood welcomed further discussions, saying it could help alleviate Chinese concerns. He stressed to AFM He that U.S. missile defense capabilities are very limited and not sufficient to overcome other countries' offensive missile forces, including countries with limited arsenals. Much like a bullet proof vest, he explained, missile defense provides an important level of protection, but is not impregnable. It is in China's interest that Japan possess missile defense capabilities, because if Japan can deal comfortably with the threat posed by North Korean missiles, Tokyo will have no need to consider other capabilities. He told AFM He that U.S. missile defense forces being developed with Japan do not have the ability to attack missiles in the boost phase, nor do they have an offensive role.

(C) Recalling his prior assignment as MFA Arms Control and Disarmament Director General, AFM He described the role he played in developing China's first export control system, which, he said, China modeled on existing international nonproliferation regimes. He described China's export control system as "effective" and noted that the PRC has an "inter-agency mechanism" for reviewing export licenses and conducting investigations. China and the United States have been cooperating "very well" on particular cases, even though "over 50 percent" of the information the United States provides to China is either untimely or inaccurate, he claimed.

18. (S) Acting U/S Rood said the United States recognizes the improvements China has made to its export control system over the years, but noted continuing challenges in China's enforcement of its export control laws and the end-user commitments it obtains. The United States endeavors to provide China with the most complete information we have on proliferation occurring in China but sometimes simply does not have additional information to share. With China's encouragement, U.S. officials have engaged in positive discussions with two Chinese firms: the China North Industries Corporation (NORINCO) and the China Great Wall Industry Corporation. Other Chinese firms remain unaware of their export control obligations, he said.

19. (S) Noting that he had instructions from the Secretary and Deputy Secretary, Acting U/S Rood raised with AFM He U.S. concerns regarding two Chinese entities: Dalian Sunny (LIMMT) and Bellamax. He reminded AFM He that the United States has discussed with China on numerous occasions the activities of these firms and explained that U.S. law mandates the application of sanctions for certain proliferating behavior. U.S. sanctions legislation is not directed at China, but applies to all countries. The United States has a legal obligation to impose sanctions if the criteria outlined in the legislation are met. Acting U/S Rood told AFM He that a decision to sanction LIMMT is presently pending before him. However, before deciding whether to sanction the firm, he wanted to discuss this matter directly with AFM He. Acting U/S Rood strongly urged China to provide the United States with information on the actions the PRC is taking with respect to its investigation of LIMMT. He noted that the United States recommended that China close down LIMMT or prohibit the firm from exporting. AFM He said he appreciated Acting U/S Rood raising this issue with him before imposing sanctions. China launched an investigation and has additional information on LIMMT to share with the United States, he said, which the MFA will soon pass to the U.S. Embassy.

Iran

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20. (C) Pointing to "extensive" discussions on the Iran nuclear issue, including his own participation in P5-plus-1 conversations, AFM He described U.S.-China cooperation as of "strategic importance" to both countries. AFM He said he is hopeful negotiations with Iran can be started soon now that agreement has been reached on a new incentives package. While China understands the "deep suspicions" the United States has of Iran, Beijing believes the best approach to resolving this issue is not through the UN Security Council BEIJING 00002322 006 OF 007 (UNSC), but through negotiations with Tehran, AFM He said. The UNSC is not a place to resolve issues, but a place "to mete out punishments." China and the United States must continue to cooperate closely in order to reach a negotiated solution to this matter. Imposing sanctions on Chinese firms will not help bilatral cooperation, AFM added.

21. (C) Acting U/S Rood stressed that a nuclear Iran would be a "profound threat" to the national security of the United States and the Middle East. The United States remains fully engaged in the diplomatic process but does not want to be put in a position of either having to accept a nuclear Iran or having to consider "other options." Pressure enhances diplomacy by encouraging Iran to negotiate, Acting U/S Rood explained, noting the impact trade and financial sanctions and UNSC actions have had on Iran's behavior.

22. (S) Acting U/S Rood told AFM He that Chinese arms sales to Iran are of great concern to the United States, because these weapons are finding their way into Iraq and Lebanon, and Iran is also transferring arms to the Taliban in Afghanistan. Iran has been irresponsible and will continue to be irresponsible, he said. He pressed China strongly to cease its conventional arms sales to Iran, telling AFM He that ending these transfers is a "question of responsibility" even if China has no legal obligation to do so. Acting U/S Rood noted that recent Iranian shipments of Chinese-produced arms to militants in Iraq violated China's end-use agreements with Iran. We understand this is not China's intent and that is why we urge China to cease such transfers to Iran, he said. AFM He responded that China takes "very seriously" any information on Iranian retransfers of weapons to Iraq. China values its strategic cooperation with the United States on these "major issues of international security," since they "pave the way for further mutual trust," he said. In closing, AFM He commented that the United States and China enjoyed great talks during this round of the Security Dialogue. He recommended scheduling two days for the next round, in a location outside of Beijing.